Sensex Plummets 1,900 Points; YES Bank Soars 50%

Mon, 16 Mar 12:30 pm

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Share markets in India are presently trading deep in the red, tracking global peers which fell even after the US central bank delivered another unscheduled rate cut.

Selling pressure is also seen as Foreign portfolio investors (FPIs) have withdrawn a whopping Rs 379.8 billion on a net basis from the Indian markets in March so far amid the coronavirus pandemic triggering fears of a global recession.

Depositories data showed that overseas investors pulled out a net sum of Rs 247.8 billion from equities and Rs 132 billion from the debt segment between March 2-13.

All sectoral indices are trading on a negative note with stocks in the banking sector, finance sector and realty sector witnessing most of the selling pressure.

The BSE Sensex is trading down by 1,871 points (down 5.5%), while the NSE Nifty is trading down by 522 points (down 5.2%).

The BSE Mid Cap index and the BSE Small Cap index are trading down by 3.4% and 4%, respectively.

The rupee is trading at Rs 74.28 against the US$.

In news from the commodity space, gold and silver prices inched higher today as investors moved to safe haven assets in a risk-off environment due to rising coronavirus cases in India and abroad.

The total number of confirmed Covid-19 cases in India were at 110 with two deaths till now.

Gold futures were up 2% to Rs 41,154 per 10 grams. Meanwhile, silver futures gained 0.9% to Rs 40,850 per kg.

On Friday, gold prices crashed by Rs 1,097 to Rs 42,600 per 10 gram in as investors moved to other assets, including rupee after an appreciation in the domestic currency. The yellow metal had closed at Rs 43,697 per 10 gram in the previous session.

In global markets, gold prices jumped after another emergency rate cut by the US Federal Reserve.

In a bold, emergency action to support the economy during the coronavirus pandemic, the Federal Reserve on Sunday announced it would cut its target interest rate near zero.

The central bank also launched a massive US$ 700 billion quantitative easing program to shelter the US economy from the effects of the virus.

Facing highly disrupted financial markets, the Fed also slashed the rate of emergency lending at the discount window for banks by 125 basis points to 0.25%, and lengthened the term of loans to 90 days.

The new fed funds rate, used as a benchmark both for short-term lending for financial institutions and as a peg to many consumer rates, will now be targeted at 0% to 0.25% down from a previous target range of 1% to 1.25%.

Despite the above aggressive move, the US stock market's initial response was negative.

Dow futures pointed to a decline of 1,000 points at the Wall Street open Monday morning.

The actions by the Fed appeared to be the largest single day set of moves the bank had ever taken. It mirrored in many ways its efforts during the financial crisis that were rolled out over several months.

We will keep you updated on all the news from this space. Stay tuned.

Note that the coronavirus threat has meant sharp losses for global stock markets.

We have written a piece around how deep this impact has been felt in the global financial markets. You can check out the same here: Worst Week for Global Stock Markets: Coronavirus Impact in 10 Points

Moving on to news from the banking sector, the Index Maintenance Sub-Committee (IMSC) has decided to accelerate the removal of Yes Bank from Nifty50, Nifty Bank and all Nifty equity indices with effect from March 19.

While Yes Bank will be excluded from the Nifty50 index, Shree Cement will be included on March 19 and the replacement will also be applicable to the Nifty50 Equal Weight index.

Meanwhile, Bandhan Bank will replace Yes Bank in the Nifty Bank index and Nifty Private Bank index.

Yes Bank will also be removed from the Nifty 500 index and Sterling and Wilson Solar will be included in that index.

Adani Transmission will replace the private lender in the Nifty 100 index.

Note that, Yes Bank on Saturday reported a record loss of Rs 185.6 billion for Q3FY20 due to a sharp jump in bad loans and higher provisioning. Also, as per the final reconstruction scheme for Yes Bank, 75% of the shareholding of the shareholders holding 100 or more shares will be locked-in for three years.

Yes Bank share price is presently trading up by 48%.

To know more, you can read Yes Bank's Q3FY20 result analysis on our website.

In one of the articles, we have written about the entire timeline of how YES Bank went from a stock market darling to a pariah. Read the article here: How the YES Bank Collapse Unfolded - 10 Points.

Speaking of the banking sector, the low access to credit for micro small and medium enterprises (MSMEs) tells us there is a huge opportunity for lenders.

This is evident from the chart below:

India's Huge Lending Opportunity

Of the 60 million MSMEs in India, only 11% had access to credit from organised lenders. Most of them are self-financed or get credit from unorganised sources.

Here's what Tanushree Banerjee wrote about this in a recent edition of The 5 Minute WrapUp...

• Self-financing limits the growth of these MSMEs. On the other hand, high interest rates from unorganised sources makes it difficult for them to earn profits.
  
  The Modi government is looking at various ways to correct this problem. Mudra loans, online loans facilities are being made available to MSMEs.
  
  Slowly but surely, lenders are sensing the huge opportunity that lies ahead for this sector.
  
  Banks and other financial firms with prudent lending practices and strong distribution networks will benefit from this megatrend.

Tanushree is counting on 7 top stocks from the Indian stock market that will benefit from this megatrend.

As per her, now is the right time to buy these stocks to profit from the Rebirth of India. You can read about them here.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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